Protect Your Business: Practical Steps to Prevent Fraud and Strengthen Internal Controls

Protecting your business is more important than ever. 

Fraud risks—both internal and external—can disrupt operations, impact cash flow, and compromise long-term stability. With the right practices in place and a reliable banking partner at your side, you can reduce exposure and build stronger financial safeguards. The following guidance outlines key risks to be aware of and practical steps you can take to strengthen internal controls and manage vendor relationships with confidence.

Understanding Internal Fraud Risks

Internal fraud often occurs when too much financial responsibility rests with a single individual. When one person controls the movement, approval, and reconciliation of funds, the opportunity for misuse increases. Behavioral cues—such as reluctance to share information or avoiding financial review—may also indicate underlying concerns.

Fraud generally arises when opportunity, pressure, and rationalization come together. Recognizing these risk factors allows you to create the checks and balances that help protect your business from within.

Best Practices for Internal Controls

• Separation of Duties – Divide responsibilities for initiating, approving, and reconciling transactions. Shared oversight reduces the likelihood of errors or inappropriate activity.
• Regular Reviews – Review all money movement processes annually, including deposits and payments. These evaluations provide early visibility into potential inconsistencies.
• Spot Checks & Audits – Regularly verify financial statements and reconcile accounts. Don’t rely solely on trust—formal verification is essential.
• Hiring Due Diligence – For positions that handle payments, incorporate background and social media checks into your screening process to help mitigate risk.

Managing External Fraud & Vendor Relationships

• Vendor Information Validation – Create clear procedures for updating and confirming vendor details. Properly verify any changes with known contacts over the phone using a phone number you have on file.
• Oversight of Payment Methods – Monitor all payment types, including checks, ACH transactions, and card activity. Confirm that each method follows secure, documented approval processes.
• Documentation and Compliance – Maintain complete, consistent documentation for every vendor and payment process. These records reinforce strong controls and support audit readiness.

Leveraging Treasury Management Services

Having a knowledgeable banking partner makes a meaningful difference in fraud prevention. Our Bank of Colorado Treasury Management team is here to help you design internal controls, evaluate risk, and identify the tools that best support your operations.

• Fraud Prevention Tools – We offer services such as Positive Pay, tokenization, and real-time account monitoring for added protection against unauthorized activity.
• Education and Awareness – We provide ongoing training to keep your team informed about emerging fraud trends and best practices for safeguarding your business.

Best Practices to Protect Your Business:

• Make “Trust but verify” your guiding principle for both internal and external processes.
• Perform an annual review of your financial processes and controls.
• Focus on these five essentials: validation, internal controls, access management, secure payment methods, and regular reconciliation.
• Consult a local Treasury Manager or banker about fraud prevention and protecting your business. 

By putting strong practices in place and working closely with a Bank of Colorado Treasury Manager, you can build a culture of accountability, reduce risk, and support the long-term success of your business.

Want to learn more? Find a local Treasury Manager for a free consultation.